New Data Salad Informs Market: PPI, Jobless Claims, Etc.

Ahead of Thursday’s opening bell, a slew of new economic data has hit the tape to inform market futures. Aside from the normal Thursday Initial Jobless Claims, we also see index reports from Empire State and the Philly Fed, as well as the other shoe dropping from yesterday’s Consumer Price Index (CPI), the Producer Price Index (PPI).

The PPI is arguably the bigger determinant toward future economic inflation, concerns of which have led to the past two weeks of market turbulence. And while a headline of +0.4% PPI is more or less anticipated, especially after seeing the CPI at +0.5%, the “core” read on PPI — subtracting volatile food and energy costs — was also +0.4%, and that’s twice as hot as expected.

Analyst had expected energy costs (Gasoline prices in yesterday’s CPI touched +8.5% year over year) to push pricing higher, but that removing it and food prices from the equation would lead to the same result may be an indicator that inflation is indeed seeping into the economy as a whole. The core revision to the previous month was actually down 0.1%, which may temper the inflation hysteria somewhat; in fact, 0.4% growth is really nothing to grow hysterical about. But it does indicate inflation is no longer just a theory.

A Tale of Two Regions

Both the Empire State (New York) and Philly Fed (Philadelphia) indexes were also released in today’s pre-market. But while the Philly Fed zoomed well ahead of expectations, the Empire State fell even further behind theirs. The Empire State report showed 13.1% growth last month, down from the 17.7% the month before and lower than the 17.3% expected. These numbers of New York State productivity are typically volatile, however, and seasonality always plays a role this close to the previous year’s holiday shopping season.

The same might be said of the Philly Fed index, although its January read of +25.8% was strong compared to the 20.4% expected. Meaning the city of Philadelphia looks to be producing goods and services at a better rate than analysts had been anticipating. But who knows what to expect a month from now?

Jobless Claims Stay In-Range

This historically robust labor market keeps apace with its weekly register of 230K new claims last week, 7000 more than the previous week’s slightly upwardly revised read. But these numbers are very low not only in historic terms but also in its strong range of the past two years or more, between 225-250 new claims. That this range has remained this low this long suggests we may be near the bottom of weekly jobless claims reasonably possible.

Continuing claims were up a bit — to 1.942 million — but this was off another healthy 1.927 million last week, and remains below the psychologically important 2 million continuing claims. Not even last summer’s horrific hurricane season could keep continuing claims elevated that high for long.

Pre-Markets in the Green

Market index futures did not budge much from their positive sentiment following the release of PPI data, which analysts had drawn a trained eye toward. All three major indexes expect to open higher, looking to post their fifth straight positive trading day overall. The 10-year bond yield has creeped northward since this new data dropped, now up around 2.92% (with a 3-handle in sight, perhaps soon), which would be another sign that inflationary conditions have taken hold — and this before Jay Powell has even convened for the first time with the Federal Reserve to decide on interest rate policy.

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